Microsoft has exceeded first quarter expectations, reporting $92.3 billion in revenue with increases in net income and earnings per share.
Devices and consumer revenue declined 3% to $15.5 billion. Xbox content and services revenue decreased 2%, primarily due to lower third-party content and Game Pass performance.
The numbers
For the three months ended September 30, 2026
- Revenue: $92.3 billion (up 19% year-on-year)
- Net income: $36.6 billion (up 32% year-on-year)
- Devices and consumer (incl. Xbox) revenue: $15.5 billion (down 3% year-on-year)
The highlights
Xbox content and services revenue was partially offset by growth in first-party content, while Minecraft experienced “all-time highs in both engagement and revenue.”
Cost of revenue for the devices and consumer segment fell 8%, driven by “lower amortisation of intangible assets from the Activision acquisition” and a 14% decrease in hardware revenue.
Xbox contributed to a 3% reduction in operating expenses, “partially offset by continued investments in R&D compute capacity and talent.”
“In Q1, Xbox revenue declined 2% YoY, compared with a 10% decline a quarter ago, while our accountability margin improved,” said Xbox CEO Asha Sharma.
“Minecraft and World of Warcraft Forever set records, Call of Duty had its most acclaimed release in more than a decade, and our PC platform revenue grew double digits. Console sales remain constrained by supply, with more demand than consoles available.”
“We’re working to get more consoles into players’ hands, including through our expanded refurbishment program. We’re making progress, with a lot more work ahead.
For Q2, Xbox content and services revenue is expected to grow in the mid to high-single digits, “up sequentially driven by the timing of content launches across both third- and first-party,” said Microsoft EVP and CFO Amy Hood.
“With launch patterns through the year, we expect growth to be strongest in the second quarter, with some deceleration in Q3 and further moderation in Q4. Hardware revenue in Q2 should decline year-over-year.”
Microsoft CEO Satya Nadella emphasised that the firm “remain[s] focused on building great games and reaching players wherever they choose to play across console, PC, mobile, and cloud.”
“We enter the holiday season in one of our strongest first- and third-party line up in years, including Modern Warfare 4, which launched last week to the best reviews for a Call of Duty game in more than a decade, and Grand Theft Auto 6, which is coming to Xbox next month.”
Earlier this month, Xbox CEO Asha Sharma reportedly told staff that Xbox had “started to return to growth” and is “making the right decision to reinvest in the business.”
“After an all-time low, we’ve started to return to growth, more than two to three times what we were, and we expect that to continue.”
Recent releases, including Gears of War: E-Day, Minecraft Dungeons 2, and World of Warcraft Forever, reportedly had strong launches.
Xbox continues its restructuring, resulting in a 20% workforce reduction, with additional layoffs expected in November and January.
Earlier this week, Xbox staff were among up to 60,000 Microsoft employees offered voluntary exit in the US, UK, Canada, and India.